Nov. 21 (Bloomberg) -- Bank of England policy maker Martin
Weale said the rate of U.K. inflation remains a concern and more
stimulus may add to pressure at a time when consumer-price
growth exceeds the central bank’s goal.

“I think it is more likely than not that inflation will
remain above target for much of the next two years,” Weale said
in prepared remarks for a speech to be delivered later today in
Manchester, England. “My analysis suggests that additional
stimulus would, without any corresponding improvement in
productivity, add to inflation.”

Weale’s comments contrast with those of his colleague David
Miles, who said three days ago that there is more the central
bank can do if recessionary conditions persist, and indicate
continued divisions among the Monetary Policy Committee on
stimulus. The BOE will publish the minutes of its Nov. 7-8
meeting at 9:30 a.m., showing how officials voted when they
halted expansion of their bond-purchase program.

Separately today, the BOE’s Financial Policy Committee,
which is led by Governor Mervyn King, holds its quarterly
meeting. After its last meeting in September, the panel
maintained its recommendations for banks to raise capital to
stave off threats to the financial system. The central bank will
publish its next FPC statement, along with the twice-yearly
Financial Stability Report, on Nov. 29.

Inflation Credibility

In his speech, which he will deliver at the Manchester
Economics Seminar, Weale said there is a risk to the Bank of
England’s credibility as long as inflation remains above the 2
percent goal. Consumer-price growth accelerated to 2.7 percent
in October and the central bank raised its near-term inflation
forecast earlier this month.

“While inflation remains above target, there is an obvious
risk that, at some point, people involved in setting of wages
and prices will start to think that we do not take the inflation
target serious,” he said. “It need not be a sudden change. The
risk is all the greater because the change is more likely to be
very gradual.”

In a Nov. 18 interview on Sky News television, Miles said
the U.K. “may need more stimulus” and that it will “depend on
how the headwinds holding back growth play out.” Weale said
that while there is “an argument for a further stimulus,”
there is uncertainty about the reasons for weak productivity and
its potential impact on inflation.

It’s possible that “a revival of demand would lead to a
sharp improvement in productivity growth,” he said. “But, at
the moment I do not feel we have a quantitative understanding of
the factors contributing to weak productivity clear enough to be
confident that productivity would move in line with a sharp
increase in demand.”